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The Ratings Game: UBS singles out Bank of America as top pick in glowing view of bank stocks

UBS on Friday hiked its rating on Bank of America Corp. and said the megabank stands out as its top pick among lenders poised to benefit from potential loan growth and higher interest rates in 2022.

UBS analyst Erika Najarian upgraded Bank of America
BAC,
-0.19%

to buy from neutral and increased the bank’s price target to $64 a share from $37 a share.

UBS also boosted its view on JPMorgan Chase
JPM,
-0.63%

to buy from neutral and increased its price target to $210 a share from $149 a share. It upgraded Wells Fargo & Co.
WFC,
+0.53%

to buy from neutral and bumped up the bank’s price target to $65 a share from $47. Citigroup
C,
-2.71%

drew a downgrade to neutral from buy, with a lower price target of $67 a share, down from $98.

While Bank of America’s sensitivity to rising interest rates is well understood by Wall Street, Najarian said she sees additional value in the company because it’s “poised to be the secular winner of the upcoming economic and rate cycle, similar to how JPMorgan dominated the post-Global Financial Crisis recovery by outperforming on profitability.”

Bright spots in Bank of America’s business include a clean balance  sheet, excess capital, and no major regulatory/legal issues, she said.

“We are particularly bullish on global banking, where heavy investments in talent  and tech should pay off,” Najarian said. “In 2022 and 2023, we project loan growth of about 4%, driven by  strength in commercial and industrial loans. “

Najarian characterized the current environment as a golden era for bank stocks, even after big gains in the sector this year. The KBW Nasdaq Bank Index
BKX,
-0.51%

has gained about 36% so far in 2021, outpacing a rise of 25% by the S&P 500.

UBS also initiated coverage of three other banks: PNC Financial Services Group Inc. PNC with a buy rating and a price target of $240 a share; Truist Financial Corp TFC with a neutral rating and a price target of $63 and US Bancorp USB with a buy rating and a $70 price target.

Najarian’s flurry of ratings moves on banks comes after she moved over to UBS this year from Bank of America.

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